Equities

Our approach to "stockpicking"

As a long-term, fundamental investor, we pursue an equity management process we believe raises our probability of investment success. The underlying tenets of this simple management philosophy are listed below:

A portfolio comprised of superior businesses is the foundation to successful long-term investing

A company’s earnings growth – the quality, sustainability, and consistency – is the primary determinant of its long-term stock price appreciation

Once attractive businesses have been identified and studied, shares should be accumulated only when the price offers an attractive risk/reward tradeoff

Building a portfolio of fundamentally superior growth businesses and avoiding over-paying for their shares should reduce volatility and generate strong price appreciation

As the chart to the right illustrates (click it for a larger view), over time, the market rewards businesses that can grow earnings faster, more reliably, and more consistently with higher stock prices (upper–right quadrant) and punishes those that cannot with lower stock prices (lower-left quadrant).

If you would like to learn more about our equity philosophy, please continue reading at Capital U – an area of our site dedicated to advanced topical discussions.

Our equity investment strategy is focused on quality, sustainability, and consistency of a company’s earnings. In each of these areas, we concentrate on the following identifiable characteristics:

Quality

Earnings growth supported by similar or better cash flow growth

Solid balance sheets that can support the business through uncertain economic conditions

More Growth

As demonstrated in the chart to the right (click it for a larger view), our disciplined analysis of quality, sustainability, and consistency results in a portfolio of companies that generates faster and more predictable earnings growth than the market over time. The higher level of predictability serves as the fundamental foundation for lower volatility across a full market cycle.

Following the last two downturns, it has taken an average of 3.75 years for the S&P 500 to fully recover its lost earnings. This recovery period was substantially less for our high-quality, consistent, growth companies.

If you would like to dive deeper into our equity strategy, please continue reading at Capital U – an area of our site dedicated to advanced topical discussions.

Results entry

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